The demographics of wealth have undergone significant changes in Asia since World War II. Some key trends and shifts include:
- Post-war Recovery and Industrialisation: After World War II, many North Asian countries, particularly Japan and South Korea, embarked on rapid industrialisation and economic development. This period saw significant government intervention, investment in infrastructure, and promotion of export-oriented policies. As a result, these countries experienced substantial economic growth, leading to a rise in wealth and living standards.
- Japanese Economic Miracle: Japan emerged as a major economic power in the post-war period, experiencing an economic miracle from the 1950s to the 1980s. During this time, Japan became known for its innovative manufacturing industries, particularly automobiles and electronics. The country's rapid industrialization transformed it from a war-torn nation to one of the world's largest economies, with a significant increase in wealth among its population.
- Tigers and Dragons: Other Asian countries, including South Korea, Taiwan, Hong Kong, and Singapore, also experienced rapid economic growth during the latter half of the 20th century. Often referred to as the "Four Asian Tigers" or "Four Asian Dragons", these countries implemented similar strategies of export-oriented industrialisation and attracted foreign investment. As a result, they achieved impressive levels of wealth accumulation and modernisation within a relatively short period.
- China's Reform and Opening Up: China's economic transformation since the late 1970s has been one of the most significant developments in global economic history. Under the leadership of Deng Xiaoping, China embarked on a path of economic reform and opening up to the world. This involved liberalising the economy, attracting foreign investment, and embracing market-oriented policies. The result was three decades of rapid economic growth, leading to a dramatic increase in wealth for many Chinese citizens.
- Post-colonial Era: Following the end of World War II, many countries in South East Asia gained independence from colonial powers. Countries like Indonesia, Malaysia, the Philippines, Thailand, and Vietnam embarked on nation-building efforts and pursued various economic development strategies.
- Economic Growth and Integration: Several South East Asian countries experienced rapid economic growth in the latter half of the 20th century. Singapore, for example, transformed from a small trading port into a global financial hub. Thailand became known for its manufacturing and tourism industries, while Indonesia and Malaysia developed their natural resource sectors.
- Regional Cooperation: South East Asia saw the establishment of regional organizations such as the Association of South East Asian Nations (ASEAN), which aimed to promote economic cooperation and integration among member states. ASEAN has played a significant role in facilitating trade, investment, and economic development in the region.
- Rise of the Middle Class: The economic growth has led to the emergence of a significant middle class in many countries in the region. This middle class has become a driving force behind consumer spending, urbanisation, and demand for higher-quality goods and services. The expansion of the middle class has further contributed to wealth accumulation and economic stability.
- Challenges and Inequality: Despite the overall economic success, Asia also faces challenges related to wealth inequality and disparities between urban and rural areas. Rapid industrialisation and urbanisation have led to income gaps and social inequalities, particularly in countries like China. Addressing these disparities remains a priority for many Asian governments as they seek to ensure sustainable and inclusive economic growth.
Significant new wealth has been created in the past 70 years and is mostly concentrated in the hands of a small percentage of the population. Now, with the passage of time, children (the sibling partnerships) and grandchildren (the cousin confederations) of wealth acquirers and creators during this period are inheriting assets and control - with varying degrees of success.
In response to this new paradigm the private wealth advisory sector in the region is maturing and private wealth planning is starting to be recognised as an intellectual discipline. Consequently, families of wealth are being exposed to global best practice and some are professionalising their private wealth. This involves them becoming more organised and strategic in the way their wealth is structured, managed, invested, and distributed.
For example, these families are beginning to realise the importance of governance, which is all about responding to three fundamental questions:
- How will the family make decisions together?
- How will the family communicate?
- How will the family solve problems together?
In practice, family governance is being adopted and evolving by some families taking some of these steps:
- Formally and holistically planning for succession well in advance, preferably years before, the anticipated transition.
- Setting up family offices to manage all the constituent parts of family capital: namely financial, human, spiritual, intellectual, and social.
- Adopting family charters to humanise the many and various legal documents and structures that bind and hold the financial capital.
- Convening family councils, assemblies, and boards (both fiduciary and advisory) comprising a combination of family members and external appointees and getting into a regular cadence of meetings.
- Identifying potential successors early and providing them with the necessary training and development opportunities to prepare them for leadership roles.
- Communicating openly with the wider family ecosystem including the second and third generations and in-laws, family business management and advisory teams, and adopting technology solutions to centralise and share important data.
- Recognising private wealth planning as an intellectual discipline and empowering the traditional "trusted advisor" to select a "team of trusted experts" to provide specialised and independent governance and advice.
- Diversifying away from traditional vertical markets and asset classes (such as the operating business and real estate) and transitioning to a strategic asset allocation approach under the supervision of an investment committee.
- Funding strategic philanthropy and impact investment programmes to support areas of societal concern (such as social services, healthcare, education, and the environment).
- Funding direct investment via family banks and venture funds to give a hand up but not a hand out to aspiring family members so they can stand tall on the shoulders of the giants who have gone before them.
- Taking a proactive approach to identifying, assessing, responding to, and monitoring risks to family capital, especially those that derive from within the family.
- Diversifying their geographic footprint, education and experiences, and global connectivity through cross-bordering wealth structuring and alternative citizenship and residency planning.
This evolution is encouraging and necessary if wealthy families are to sustain themselves and, more critically, retain social license in a region greatly affected by wealth inequality. Child poverty, declining standards in public education and healthcare, fiscal deficits, climate change, aging populations, and the transition to sustainable industry and agriculture are defining issues of a generation which will need both public and private capital to address. But the wealthy are sometimes targeted by media, politicians, and even their peers, as being part of the problem rather than the solution.
It is therefore encouraging that many wealthy families in the region are using their platform of privilege and access to expert advice, resources, and influence not only to benefit themselves but also to accelerate economies, develop communities, and drive positive systems change.
For as long as this evolution continues these families will need the ongoing support of experts in the organisation of private capital.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
